Birdsall v. Russell

This case comes here under the direction of the judge, before whom, with a jury, the cause was tried, that the exceptions taken at the trial be heard at general term in the first instance. The most important of those exceptions was one which was taken to the instruction given to the jury, after proofs were closed, to render a verdict for the defendant.

The action was brought to recover possession of two first mortgage bonds, for $1000 each, made by the Toledo, Nor-walk and Cleveland Railroad Company, September 1, 1857, payable to Alfred Kelly and George S. Coe, “ or the holder” thereof, on the 1st of August, 1863, with interest thereon at the rate of seven per cent, payable semi-annually, on the first days of February and August in each year, upon presentation of the coupons annexed; which bonds, the complaint alleges to have been wrongfully taken from the plaintiffs’ possession in November, 1860, and to be detained from him by the defendant. - The answer denies the plaintiffs’ ownership, and avers that the defendant purchased the bonds in his hands through the firm of Thomas Denny & Co. brokers, in the ordinary course of business, in good faith, without any knowledge or notice of the alleged interest of the plaintiff therein.

Evidence was given upon the trial which was sufficient, I think, to warrant the jury, if the case had been submitted to them for their determination, in finding the following facts: Five hundred and twenty-five bonds of the description mentioned in the complaint, and no .more, were issued by the company; they were numbered consecutively front one to five *544hundred and twenty-five inclusive; and, annexed to each, and upon the same paper, were twenty-four interest coupons, marked with corresponding numbers; which numbers- upon the bonds and coupons, respectively, constituted the only difference between them each, and each of the others. ! Taking bond number two hundred and twenty-five and one of its coupons, as samples, they were of the form following:

“ United States of Amebica, State of Ohio. $1000. Ho. 225. Toledo, Horwalk and Cleveland Bailroad Company. Bond. Secured by lien on the whole road. The Toledo, Horwalk and Cleveland Bailroad Company acknowledge to owe Alfred Kelly and George S. Coe, or bearer, one thousand dollars for money borrowed to aid in the construction. of their railroad,- which sum said company, promise to pay to the said Alfred Kelly and George S. Coe, or the holder hereof, at the office of the Ohio Life Insurance and Trust Company, in the city of Hew- York, on the first day of August, 1863, and also interest thereon at the rate of seven per cent per annum, semiannually, on the first days of February and of August of each year ensuing the date hereof, until the said principal sum shall be paid, on the presentation of the annexed interest warrants, at said office.; and said company further agree, that this obligation, and all rights and benefits arising therefrom, may be transferred, by general or special indorsement, or by delivery, as if the same were a note of hand, payable to bearer, and hereby waive all benefits from valuation or appraisement laws,

IrL testimony whereof, the said company have hereunto caused to be affixed their corporate seal, and [L. S.] these presents to be subscribed by their president, the first day of September, 1851.

C. L. Boalt, President

The Toledo, Horwalk and Cleveland Bailroad Company will pay to the holder hereof, at the office of the Ohio Life Insurance and Trust Company, in the city of Hew York, on the first day of August, 1863, thirty-five dollars interest due on that day, on their bond Ho. 225. '

C. L. Boalt, President”

*545In November, 1860, the plaintiff, who was then the owner of five of those bonds, with their coupons, numbered from 336 to 340, inclusive, placed them in a tin box and deposited the same in a bank for safe keeping until the next day> whence such box, with its contents, was surreptitiously taken by some thief, or person other than the owner. The plaintiff immediately published a notice of his loss in several newspapers, and also distributed among bond dealers and brokers of the city and elsewhere, a handbill to the same effect; but neither the defendant nor his brokers saw such notice.

Up to the time of the loss, the semi-annual coupons had been regularly presented to the agent of the company, and pasted into a book in consecutive order according to their numbers; no duplicates ever having been offered during that period. But, on examining the paid coupons for February, 1861, it was found by the company that three of the coupons due that month and so paid, and numbered respectively 225, 238 and 445, were duplicates of three others, bearing the same numbers, which had also been presented and paid. Two of those six coupons, numbered 225 and 238, thus duplicated, had been cut by the defendant from the bonds so purchased by him through Denny & Co. and had been paid to him by the company’s agent. The numbers of those coupons corresponded with the numbers upon the bonds in the hands of the defendant, and the two coupons of which those were duplicates had been taken from other bonds bearing the same numbers. In few words, the evidence so given, it appears to me, would have authorized the jury, if they believed the testimony to be true, to find that two of the- four bonds numbered 225 and 238 belonged originally to the plaintiff.

But that was not enough to entitle plaintiff to a recovery, It was also incumbent upon him to prove, by the testimony of experts, or by the exhibition of the papers themselves or otherwise, such facts as would authorize the jury to find that the numbers of the particular bonds in controversy had been changed. Nor would that have been sufficient. The plaintiff was also bound to show that the bonds, at the time *546they were purchased by Denny & Co. or came to the hands of the defendant, presented such an appearance as ought to have created a suspicion in the minds of prudent, careful experts engaged. in the businesss of dealing in such securities. For, although these bonds, payable as they are to the holder, and being by their terms, transferable by delivery, are so far negotiable as to be covered by the rule which protects bona fide purchasers of negotiable securities, even though stolen or fraudulently obtained; (State of Illinois v. Delafield, 8 Paige, 527 ; Gould v. The Town of Venice, 29 Barb. 452 ; Mor. Can. and Banking Co. v. Fisher, 3 Am. Law Reg. 423 ; White v. Vermont and Mass. R. R. Co., 21 How. U. S. R. 525 ; Mechanics’ Bank v. N. H. R. R. Co., 3 Kernan, 599;) yet it is only a purchaser in good faith, one having no such knowledge or information, either from the appearance of .the document itself, or otherwise, as would put an honest, careful man upon inquiry in regard to the real ownership, who is thus protected. It may be added in this connection, that the determination' of all questions of fact touching the bona or mala fides of such a purchase is exclusively within the province of the jury. (Williamson v. Brown, 15 N. Y. Rep. 354. Tuttle v. Jackson, 6 Wend. 213. Ayer v. Hutchins, 4 Mass. R. 370. Cone v. Baldwin, 12 Pick. 545. Grant v. Vaughan, 3 Burr. 1516. Peacock v. Rhodes, 2 Doug. 633. Fowler v. Brantley, 14 Peters, 318.)

The question then is, did the plaintiff prove such facts upon the trial as would have justified the jury, had the evidence been credited by them, in finding that the bonds in question ever belonged to the plaintiff, and that they presented such an appearance, when bought by Denny & Oo. for the defendant, as ought to have put them or the defendant upon their inquiry ?

Neither of the four bonds appears by the case to have been shown to the jury; and, of course, they could have no knowledge as to the appearance of the instruments from occular inspection. Indeed, the only ■ evidence given upon the trial, which is now claimed by counsel to have tended, even remotely, to prove that the bonds and coupons in the hands of the defend*547ant were not, in appearance, perfectly correct, and precisely like all the others of the same class issued by the company, is found in the testimony of Mr. Luce, the treasurer, who superintended the payment and registering of the coupons. That witness, after stating that he saw and examined the two bonds held by the defendant, in the winter of 1861, and that “ on seeing them, there appeared to be no evidence of their being counterfeits,” that he then “ looked at the numbers, and concluded it was possible the numbers might have been changed,” was further interrogated and testified as follows *.

Q. Look at the bonds now produced by the defendants counsel, and shown you, being numbered 225 and 238, and state whether or not they are the bonds which the defendant exhibited to you at the interview you have spoken of.

A. They are.

Q. State whether or not they were in the same condition then as now, in reference to the paper pasted behind “No. 238,” in the bond of that number, and the pieces of paper pasted behind the coupons of August 1, 1863, in each bond.

A. I can’t state specifically as to the coupons, I remember there were pieces of paper pasted back of one of the bonds, and some of the coupons.

Q. Did you hold them up to the light to examine the coupons ?

A. Yes, sir, I did.

Q. What did you discover by such examination ?

(Objected to. Withdrawn in consequence of the objection.)

Q. State how the appearance of the coupons as then held up to the light by you corresponded with their present appearance when held up to the light ?

A. It was the same.

Q. State what you refer to as this appearance of the coupons ?

A. The thinness of the paper where the number is; the brightness of the ink, with which the numbers are made, and the paper pasted on the back.

I think we may safely assume that the papers thus produced by the. defendant were the bonds purchased by him through Denny & Co,, and, also, that the bonds so exhibited to *548the witness and placed in his hands, were then in the condition and exhibited the appearance indicated in the second of the above questions put by the plaintiff's counsel, without objection, and tacitly assented to by the responsive answer of the witness ; as well as the further fact that when such bonds and coupons were held up to the light, it clearly appeared that the paper was thin where the number was placed.

It appears to me, too, that, inasmuch as the defendant had offered no proof to show that the bonds and coupons had been altered in his hands, the jury had reason to believe the documents were in the same condition when purchased which they exhibited at the time of the trial. They would, therefore, have been justified in finding that, when the purchase was made, a paper was pasted behind the number upon one of the bonds, and another paper was similarly pasted behind the number on each of the coupons which became due on the same day, to wit, the 1st of August, 1863 ; as well as that the papers were thin where the numbers were placed.

Those facts, if the jury had been permitted to find them, would, in the absence of all evidence that the other two duplicates had been altered or changed from their original condition, have authorized the conclusion that the bonds held by the defendant were a portion of those which had been stolen from the plaintiff; and, it seems to me, they would likewise have been sufficient to sustain a finding that the bonds and coupons, when purchased, presented such suspicious marks, or rather, exhibited, of themselves, such evidence that they had been tampered with, as ought to have put the buyer upon his guard, and induced further -inquiry.

I am, therefore, of opinion that when the case was closed and submitted, there was-enough evidence before the jury to have authorized a verdict for the plaintiff; and that the direction to render a verdict for the defendant was, consequently, erroneous.

The judgment should be reversed and a new trial granted, with costs to abide the event.

Two issues of fact were presented in this case. 1st. The former ownership, by the plaintiffs’ testator, of the bonds bought by the defendant. 2d. Notice from the appearance of such bonds, when bought, sufficient to make the defendant suspect the ownership of the seller.

Dr. Kittredge, a witness for the plaintiffs, who was secretary and treasurer of the company issuing such bonds, testified that only five hundred and twenty-five similar bonds were issued, which he received in blank from Mr. Coe, the mortgagee in trust, with the certificates signed by the latter; the written part of such bonds and their numbering, with that of the coupons, was done by himself and by a Mr. Baldwin, under his immediate supervision. They were numbered consecutively, from one to five hundred and twenty-five; he repeatedly read the numbers on each bond both in the sheet and after they were folded and numbered on the back; the reason why he did so was to be certain that no mistake was made in their numbers. They were read consecutively, beginning at No. 1 and going through the whole series of five hundred and twenty-five ; he made a corresponding memorandum in a pocket book at the time. He further testified there was only one bond of each number ; he canceled two blank bonds by lines across them and destroyed all others printed. He also, stated there were no duplicates of bonds or coupons issued ; he kept all the blank bonds and the seal of the company in his possession; from the care used in counting and numbering such blanks and bonds, no duplicates could have been issued without it having been detected at once. This testimony as to numbering of the bonds, the number issued and the destruction of the remaining blanks, was fully corroborated by other witnesses.

The testimony of Mr. Line, a treasurer of the company, and others, tended to show that after the loss of the bonds by the testator of the plaintiffs, no coupons had been paid or presented corresponding in number with the lost bonds, while duplicates of coupons numbered to correspond with those held by the *550defendant, had been paid. But it was also established by him that duplicates of three other numbers had been paid; and Mr. Sebring, an employee of the company," testified that some coupons of similar bonds had been paid without any number.

The evidence, therefore, to go to the jury to establish that there were not four bonds issued originally, numbered in duplicate corresponding with «those of the defendant, was quite strong. But there was no evidence offered to show in which of the four produced the numbers had been written by Kittredge or Baldwin> The latter was not examined at all, and neither the former nor any one else was interrogated as to the handwriting of the figures. There was nothing to show whether any thing remarkable in the appearance of the bonds did not exist when they were first numbered. There was no evidence what was the appearance of the duplicate bonds, which were exhibited on the trial to Mr. Ooe, one of the witnesses. The evidence therefore was clearly defective, and could not prove that the bonds held by the defendant were lost by the testator of the plaintiffs, when the evidence was the same against two other bonds. Ueither Kittredge, Baldwin nor any one else, was examined as to the handwriting of the figures in the duplicate coupons paid, which were in Ohio, to show that either of them had been altered. The evidence, therefore, to go to the jury on the question of the ownership of the bonds in question was incomplete.

But even assuming that there was sufficient evidence of the former ownership of the bonds in controversy by the testator of the plaintiffs, it still remains to be determined whether there was enough evidence of something in the appearance of the bonds, when bought by the defendant, to warn him that the seller had not lawfully come by them, and was not the owner. It is conceded that the only thing altered on the face of the bonds were the numbers. The body of the instrument, the signatures and certificate of the trustee, remained untouched. Keither such certificate nor the mortgage, to which it refers, mentions any thing of numbers! They were, therefore, no essential part of the obligation. They seem to have been inserted principally for the benefit of the company, to prevent *551their paying spurious bonds or coupons or more than they intended and agreed to pay. They were equivalent to devices, or colored inks used in printing promissory notes to prevent counterfeiting. The bonds were legally binding, with or without a number. The company was bound to pay to the true owner, although he erased the number. It. was, therefore, not one of those things which the defendant was bound to examine, to ascertain if the company would be liable, and it was fair to presume he did not do so, rather than deprive him of what he has paid for. In order to charge the defendant, therefore, with notice of any thing so wrong in the number as to induce suspicion of want of ownership, the appearance of the bond where the number is written should be at least such as to induce an ordinary observer to suspect an attempt at concealment or imposition.

The bonds are capable of being transferred by delivery, and are payable to the holder. (Brainard v. Harlem R. R. Co., Ct. of Ap,, N. Y., 1862, December. Same v. Same, N. Y. Supr. Ct., March G. T. 1863. White v. Vermont & Mass. R. R., 21 How. U. S. Rep. 525. Bank of Rome v. Village of Rome, 19 N. Y. Rep. 20. Gould v. Town of Venice, 29 Barb. 452. Delafield v. State of Illinois, 2 Hill, 177. S. C. 8 Paige, 527. Morris Canal and Banking Co. v. Fisher, 3 Am. Law Reg. 423.) The purchase of them in market overt, in the ordinary course of business, without notice of any infirmity in the ownership of the vendor, vests a good title in the purchaser. The only evidence as to the appearance of the bonds, was that of Luce, who testified that one of them had a piece of paper pasted on its back when he examined them, sometime before the trial. He also testified, that on their holding the coupons to the light he discovered the paper to be thin where the numbers were; the ink was bright and a paper was pasted on the back. But he also stated he was not then positive in his views concerning the bonds, when he so examined them, that he did not blame the agent of the company for paying coupons numbered in duplicate even after examining the bonds, and that with the limited knowledge both possessed, he should have paid them himself at the time. The defendant, at the time of the *552examination, claimed they were duplicated by some clericalerror, to which the witness made no reply, in order to avoid being mixed up'in-the matter, and because hé was not certain him,self as to the fact of the alteration of the numbers. This was strong evidence- to show there was nothing in the appearance of the bonds to awaken the suspicion of the defendant’s agent at the time he bought the bonds, when an intelligent person, who had a suspicion of something being wrong, could find nothing in the ■ appearance of the bonds after a close examination of them, to warn the company or himself that such an alteration had been made as cast doubt upon the ownership.

• The main evidence relied upon by the plaintiffs to prove notice to the defendant’s agent of want of title in his vendor, ho.wever-, was the appearance of the bonds themselves, which their counsel claimed had patches of paper pasted on their back, behind some of the numbers, and were thin and rubbed where- other numbers occurred. Paper pasted on the back of an obligation, could hardly be notice of any thing to a purchaser. He would only be supposed or required to examine the face, and then- only as an ordinary careful observer would, without using-the.utmost vigilance. There is no reason why he should be bound or. supposed to have "held the- instrument to the light in order to. ascertain if there- were any erasures, or if he found theray to ■ suspect a larceny of the bonds on that account. It would -be very rare that in the ordinary course of dealing, such a- scrutiny -would be made, the only examination usually being of. the signatures, the writing or printing of the obligation and its general appearance. Eot a-witness was asked to state what 'there, was in the appearance of the bonds in question, to awaken a- suspicion of any thing wrong, in the minds Of any ordinary observer..-- Luce, the only person -who testified-as to their appearance,, could not satisfy himself that an alteration had been made, after a minute examination, and believed the company justifiable in paying the altered, coupons.

= The true rule in regard to notice is that the circumstances must be such as.not only to lead to, but to direct the course of inquiry, which would, if pursued, end in a discovery of the *553defect. (Williamson v. Brown, 15 N. Y. Rep. 354.) How could an alteration of a number do this in a bond more than in the case of a hank note ? It might have been altered when it was first issued, or by a prior owner, who had a perfect right to blot it out without impairing the obligation of the bond. Such a change implies neither concealment nor imposition, and does not raise a doubt of ownership. It was not notice of any infirmity of title. It is not enough that something strange or unusual should appear on the face of the instrument; it must be something which affects the contract or its title.

But there was no evidence in the case that the appearance of the bond was different from what it was when issued ; any of the numbers might have originally been written on an erasure. If an inquiry had been made of the officers of the company, they could have given no additional information, except that bonds with such numbers had been issued. There was no other direction given to any inquiry. Possibly Mr. Kittredge or Mr. Baldwin might have informed the purchasers of an alteration, if there was one, but the defendant knew nothing of their agency. The jury could not determine, therefore, by mere inspection that there had been any alteration.

But a mere alteration was not enough, unless done in a manner to attract attention and create a suspicion of concealment. The court was fully as proper a judge to decide whether the .mode of alteration was sufficient prima facie evidence of notice of some infirmity of title to go to the jury, as the latter were to pass upon it. Both merely relied on the evidence of their own senses. No rule of law can permit a jury to find from the mere appearance of an instrument, alone, that it furnishes evidence of having been stolen; otherwise every one could be submitted to a jury on such an allegation. It is for the court first to pass upon the question of relevancy, or else there must be some oral evidence of defects or appearances. But the question in this case was not merely the fact of alteration, but its being done in such a manner as to create suspicion in the mind of an intelligent observer using the attention exercised by a prudent man in his own affairs as to the infirmity of the vendor’s *554title. We have no evidence before us of the nature of the alteration, except what tends to establish that it was not attractive, glaring or striking, and, therefore, there was no error in refusing to submit the question to the jury.

Upon full reflection and examination, therefore, I feel confirmed in the view that there was not sufficient evidence on which to submit any question of fact to the jury on the trial. The admission of similar evidence to that offered in this case to overthrow the title to a negotiable instrument would.terminate the negotiability of such instruments for all practical purposes. Weighing such evidence by the closest scrutiny after a discovery of a loss and a supposed alteration, is entirely different from the reasonable examination and observation to be practised, when a negotiable instrument is offered for sale, by the vendee. It would be unfair to make the former a standard for the latter, and unless we do so, there is nothing.in this case to sustain the plaintiff’s cause of action.

The newspaper notices and handbills were not brought home to the defendant or his agents. (Vernon v. Manhattan Company, 22 Wend. 182. S. C. 17 Wend. 524, per.Cowen, J.) The police detective was not such an expert as to entitle him to pass upon an alteration not apparent upon bare inspection.

Upon'the whole, I feel satisfied no errors were committed on the trial; the motion for a new trial should be denied, with costs, and the defendant permitted to enter up judgment of dismissal of the complaint, with costs to be adjusted.

Hew trial granted.*